Opportunities and Challenges

This chapter captures situations that reect the growing interest and enthusiasm of business towards rural markets. Opportunities in the rural market are examined in the light of intense and growing competition in urban markets. The market opportunities are clearly perceived through a comparison of consumption patterns for durables as well as non-durables between the rural and urban markets. Identifying opportunities and clarity in decision-making requires an unambiguous denition of rural marketing. Rural marketing and rural markets are conceptualized to clearly dist inguish them from urban market ing and urban markets. Limitations in the approach used for identifying the rural markets are also examined.

THEROAD MAP

Indias vast rural market offers a huge potential for a marketer facing stiff competition in the urban markets. The rural market environment is very different from the familiar surroundings of the urban market. Rural consumers have customs and behavior thatthemarketer may nd difficultto contendwith..

Rural Marketing

The understanding of Indias rural markets is an important objective of this book. The other major objective is to comprehend dinuences on this market with emphasis on understanding consumer response to marketing decision variables. The third objective of the book is to develop appropriate methods to research rural markets. Appropriate research methods are important in the context of the rural market for two reasons: (a) the consumers ability to discriminate varies; and (b ) the reference points used by rural consumer differ from those of the urban consumers. The research methods to measure percept ion, attitudes and behavior in rural markets vary from the approach used in researching urban markets. Research methods unsuitable in rural markets create distorted picture of the consumer and result in failure of marketing efforts. The opportunities in the rural market are demonstrated by comparing consumption levels in urban and rural markets for different product categories. Their volumes and growth show the importance of this market. Understanding

demographic pro- les of consumers and their response to brand offering is a useful approachto analysetheruralmarket. A large number of cases lets in the book capture the consumer response to brand offering. The need for appropriate methodology for researching consumers is demonstrated by non-applicabilit y of the urban reference points and measures in the context of rural markets. Literature available on rural development provides alternative methods to researchruralmarkets.Theunderstandingofthe rural consumers is utilized in decision-making situations. Organising the chapters according to marketing decision variables provides the focus on decision-making. The critical aspect of reaching the consumer with the message and the product offered is examined in great detail. Short cases and data illustrated later in this book pro-vide the decision-maker with important criteria for evaluation of options in these markets. The inuence of consumer perceptions on product design in different productmarket situations is identied. Consequently, the concepts and the framework developed are relevant for marketing decisions. The use of the existing network of channel members in rural markets is the key to connecting with the rural heartland. Haat sand melas. Which are unique to rural markets; supplement the re-tailor route to rural markets? The interaction between consumers and these unique institutions provides information for use in marketing decisions. The marketing strategy is examined in the context of the competitive situations in the rural market. Com-petition is categorized into (a) generic competition, (b)competitionwiththe unorganized sector, (c) new entrants, and (d) meeting the challenges created by imitations. The challenges faced by the marketer in these competitive situations lead, at the same time to the opportunities available in rural markets.

DEFINING RURAL MARKETING AND RURAL MARKETS

Need for Rural Marketing as a Separate Area of Study Is the difference between urban and rural markets signicant enough to justify rural marketing as a separate area for study? The justication for a separate treatment lies in the differences in the behavior of the rural and urban consumer. Justication for rural marketing on behavior variation suggests a denition of rural marketing based on consumer behavior rather than on geographical location. This would suggest that mentality, and not locality, is the identier for rural markets (Challapalli, 2005).

Rural Marketing
The subject of rural marketing has relevance because of the need for a different marketing approach necessitated by variation in consumer behavior and income levels, as also by differences in the macro- and micro-environment of consumers located in rural areas. The important aspects of the micro-environment are the type of channels available in serving rural markets and also the type of media available to promote products in rural markets. The type of infrastructure in rural areas has implications for marketers. The geographically spread-out nature of markets also requires different approaches to these markets. Rural marketing is, therefore, not limited to behavior and attitude of customers but also includes the inuence on marketing decision variables that result from the non-urban location. It is convenient to classify transactions as ow of products or services between rural and urban locations. In Figure 1.1, the rural and urban location from which the product originates is indicated on the vertical axis and the horizontal axis indicates the location where the product is sold or consumed. Each quadrant represents a ow of products from one location to another. This then results in four possible ows, as shown in the gure, in two dimensions. Rural market ing excludes the UrbanUrban ow, that is, quadrants 4, and could include quadrants 1, 2 or 3. The rural to rural ow is the marketing of products produced locally and is a relatively simple exchange management process. The products made and sold in rural areas are milk and milk products, locally manufactured toothpowder, cloth, etc. Managing the rural to urban ow has similarities with current marketing literature in that its focus is on understanding the urban consumer, competition and channels serving that market. The products made in rural areas and sold to urban centres are khadi cloth, hand-crafted products, etc. The focus of this book is therefore on quadrant 3ofFigure 1.1, that is, the urbanto ruralow for example, selling in rural areas battery cells manufactured in urban areas.

Rural Market
This denitionofruralmarketing based onowsbetweenruraland urban locations requires dening the rural area. A simple method of differentiating rural and urban areas is to examine the notication of the settlements as made by the concerned state government. The advantage of this method is its simplicity. The drawback of this method, however, is that the notication does not always reect the nature of the settlement. The Constitutional Amendment in 1993 required the state governments to notify the settlements as urban or rural. States like Tamil Nadu and Uttar Pradesh, out of convenience, notied all the then existing town panchayatsin and town committees asmunicipal bodies. Many of these

were small settlements and may require being classied as rural and not urban areas. Certain other state governments have notied small towns as panchayatsin order to obtain Central government assistance for these areas. The desire to avoid taxation has also been an important motive in resisting the formation of municipalities. Different charges for services and subsidies are also a problem. The criterion used by the Indian Census is, therefore, useful in such a context. Rural is dened as that which is not urban. Indian Census classies settlements as urban if they meet the following three conditions: (a) a minimum population of 5,000;(b) a population density of at least 400 per sq km; and (c) 75 perc e n t o r mo r e o f m a l e w o r k i n g p o p u l a t io n e n g a g e d i n no n- agricultural employment. These are termed as census towns. The settlements classied as municipalities but not meeting the above criteria are listed as statutory towns by the Census department. The statutory towns, therefore, are more likely to have the characteristics of a rural area than that of an urban area. Similarly, non-municipalities listed as census towns are likely to have urban characteristics even though they are not declared as municipalities by the state government

(Sivaramakrishnan,2002). The denition that is best suited is the one used by the Census as it has advantages of relevance, simplicity, and measurability. The identication of rural areas as dened by the Census is restated: rural is that which is not urban. Urban is:(a) All locations with a municipality/corporation, cantonment boardor a notied town area.(b) All other locations satisfying all of the following criteria:(i) a minimum population of 5,000;(ii) at least 75 per cent of male working population engaged in non-agricultural activities; and(iii) a populationdensityofover 400 per sq km. The use of geography to dene rural markets is relevant from the perspective of a marketing manager. Rural markets require a different market ing approach because of variat ion in consumer behaviour and income levels as also differences in macro-and micro-environment of consumers located in rural areas. The important aspects of the micro-environment are the type of channels available in serving rural markets and also the type of media available to reach out to the rural markets. The type of infrastructure in the rural areas has implications for marketers. The geographically spread-out markets also requires different approach to these markets than the ones suitable for the urban markets. Ruralmarket is,therefore,thesetofconsumerswho arelocatedinrural area and who exhibit behaviour that is different from the behaviour of consumers in urban areas. The marketing issues and, therefore, the marketing decisions in serving the rural markets vary considerably compared to marketing for the urban consumers